Amazon sees a future with many different devices

Kindle may not be crucial to company's long-term success, analysts say

By

DanGallagher

SAN FRANCISCO (MarketWatch) -- With the Apple iPad having launched earlier this month, Amazon.com is expected to face its heaviest competition yet in the market for e-books that the company helped to pioneer with its own Kindle device.

However, on a conference call to discuss the company's most recent earnings results, Amazon
AMZN, -0.66%
CFO Tom Szkutak gave a different vision.

"We're excited about the idea that the world may shift to a place where 3G connected devices are available to browse the net. And our view is that the more web-connected devices, whether it be tablets or smart phones, the better that is for our retail business," Szkutak told analysts on Thursday afternoon.

He added that "we'll figure out the best way to make sure that we make it as easy as possible for customers to purchase from those devices."

The comments came after Amazon reported a surge in first-quarter earnings that were driven in large part by strong sales growth in its electronics and general merchandise category, which includes the Kindle. See full story on Amazon's results.

The company does not disclose sales data for the Kindle. Youssef Squali of Jefferies & Co. estimates that about 420,000 units were sold for the quarter, while e-book sales contributed about $290 million in revenue for the period.

"The iPad so far doesn't appear to have had as much impact on Kindle sales as initially feared, with Kindle still the most popular item on Amazon, but it is too early still," he told clients in a report Friday.

Amazon faces an interesting quandary. While company has historically made its money selling media content, it has moved into the hardware realm in the last two years with its Kindle e-reader. That has put it into direct competition with experienced consumer electronics manufacturers such as Sony Corp.
SNE, -1.14%
and -- most recently -- Apple Inc.

Apple's
AAPL, -1.54%
latest gizmo -- the iPad -- is a full on portable computing device that allows users to surf the Web, watch videos, send e-mail and read e-books. Apple has launched its own e-book store to feed the device, which competes with Amazon's own Kindle store.

Few if any analysts believe that Amazon has the desire to become manufacturer when the company has been wildly successful at selling things made by others.

"What Amazon really wants to do is sell stuff. It's a lot more profitable to sell a digital copy of a book then to make products and compete with other manufacturers," Squali said in an interview. "Their core competency is not based on building hardware."

Kindle vs. iPad

In some ways, the iPad and the Kindle are hardly competing devices.

Compared to the iPad's many capabilities, the Kindle is basically a single-use device. It was designed for downloading and reading books. It's E-Ink screen is believed to be easier on the eyes for long-form reading, and it was the first e-reader to offer a wireless connection to allow users to buy and download a new book in less than a minute from anywhere.

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